Pension Term Assurance confusion continues over GIO
h3>Round up
1 – one life insurance rate change since the last bulletin, this time from Friends Provident
46 – the average age of an IFA in the UK, according to the FSA
£4,400 – the average amount spent on social security per person in the UK in 2004/05, compared to the EU average of £4,240 per person
1.6m – the number of new term life assurance policies sold in the UK in 2006, compared to just 139,000 Income Protection policies
1.7m – the number of people in the UK who will have dementia by 2051, according to experts
£125 billion – the total amount spent by the UK Government on social security in 2004/05
That’s a total of 6 life insurance rate changes for our ASDA competition. We have four winners who will be contacted separately. We’ve also had various entries for March’s competition – to name a film that represents the life insurance and protection industry. Do keep them coming!
Pension Term Assurance confusion continues
In recent weeks we have had two clients looking to exercise the GIO (guaranteed insurability option) under their existing pension term life assurance policy. This is where the customer can increase the existing amount of cover, without underwriting, in the event of a major event in their lives, such as marriage, a new mortgage, or the birth of a child.
However, right now we cannot let our customers exercise the option as we are yet to hear from Treasury as to whether or not any increases to existing policies will incur the loss of existing tax-relief. As such, all we can do is inform the client of the current confusion and write a separate new policy, without tax-relief.
Consumers with existing Pension Term Assurance life insurance policies should be careful not to make any changes to their policies until the new rules are made clear.
FSA research announced this week
* 70% of people shop around to get the best deals on new gadgets. But only 43% bother to compare deals on life insurance
* 69% of people said they hated shopping for insurance, 52% found it too complicated to compare insurance products
* 49% of people said they never quite know what they're covered for
* 52% of people find it too complicated to compare one product against another, while 46% don't know if they are getting a good deal
* 52% of people rarely, if ever, check their life insurance policy details to make sure it provides them with adequate cover
* 52% of people assumed that insurance companies would make it difficult to get a claim settled
‘It's the rich wot gets the pleasure, it's the poor wot gets the blame’
Here’s a thought. If only the rich can access serious financial planning advice (and note we say ‘if’ because we’re not sure that’s strictly true), then by default it is the lower end of the market that is either buying nothing, buying with generic advice or buying without advice, from websites and the like.
Sales generated through generic advice will not be covered by consumer protection to the same extent as advised sales because under generic advice the consumer is still responsible for the sale rather than the generic adviser. Therefore, any model that tries to open up market access to low-income households through generic advice will exclude these consumers from important elements of consumer protection from the Ombudsman, with compensation only for the well off.
Therefore, it is the lower end that are hit hardest if a mistake is made. That’s firstly because if the rich and well-off are taking specialist advice, their decisions are less likely to be bad for them. Secondly, they have the protection of the Ombudsman if the adviser has recommended an unsuitable product. Those who didn’t take advice do not, and as such the consequences are potentially far, far worse.
Comments of the week
‘An especially poignant letter in my in-tray this week accuses me of being 'heartless and unfeeling'. Sent by a young widow, it asks how I manage to sleep at night, following a recent decision we made in an insurance dispute. The life insurance company in question had rejected the claim she made on her late husband's life insurance policy. Unfortunately, some of the information he had given the insurer was inaccurate, and of course it is now impossible to ask him why. From her point of view, left on her own with young children, an ombudsman who can't understand her terrible plight is as worthless as that life insurance policy now seems to be.
A large proportion of the disputes we are asked to settle involve life's tragedies: disability, death, bankruptcy or divorce. People turn to us in the most difficult and distressing of circumstances. And it's easy to understand their expectation that we'll naturally want to uphold their complaints and help them rebuild their lives.
Of course, our natural instinct is to want to reach out and sympathise. However, we have to decide cases on a dispassionate analysis of facts. Rather like a court of law, we must set aside our emotions and settle disputes – however upsetting – by being impartial and sticking to the objective facts of the case. And we know that this can sometimes make us seem insensitive, even callous.
It doesn't always help that we operate at a distance, rarely meeting face-to-face the people directly affected by our decisions. And although we remind consumers that an adverse decision from us hasn't affected their legal rights, the truth is that – for most people – litigation isn't a realistic option. If we turn them down, that's the end of the road. This makes us particularly mindful of the impact our decisions can have.
I'll be answering the letter, explaining why I can't overturn the decision in her case. But I rather doubt that my reply will seem at all convincing in the circumstances.’
Walter Merricks,
Chief Ombudsman
'Insurance – life cover, income protection and so on – plays an important part in protecting our families, homes and possessions. But as with all financial products, consumers need to be capable and confident in making the right choices, including shopping around for the best deal and asking the right uestions.'
Vernon Everitt,
Director of Retail Themes, FSA
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